LONDON: Sterling stabilised on Thursday as prospects for a Brexit deal appeared to improve, with Britain giving it a 66% chance of success. The pound inched up towards $1.30 in early session, before giving back those gains. Against the euro, sterling strengthened slightly. A Bloomberg News report suggested officials might be more optimistic than they were letting on in public.

British Prime Minister Boris Johnson and European Council President Charles Michel agreed on Wednesday that some progress had been made in talks on a trade deal, though significant differences remained. On top of that, analysts said the Bloomberg News report suggesting that in private officials were more optimistic about the likelihood of clinching a deal had helped sentiment.

"In any case, next week's EU Council meeting is not the hard deadline we had thought it would be but rather yet another 'stock-taking exercise'," said Marshal Gittler, head of research at BDSwiss. The pound was last trading flat against the US dollar at $1.2920 and up 0.2% versus the common currency at 90.88 pence.

The week has proven volatile for the British currency with contradictory Brexit headlines flying around as Britain and the EU negotiate their future relationship. An overnight rise in implied volatility gauges to a two-month high of above 12% in sterling, suggested traders were prepared for more unexpected moves as talks continue.